Companies with tax debt due to the pandemic will have a renegotiation round.

As part of the actions the government is taking to address the second wave of COVID-19, the Attorney General's Office for the National Treasury (PGFN) has opened a new round of tax transactions – a program for renegotiating debts of companies and individuals with the tax authorities. The target now is tax debts incurred due to the pandemic during the period "from March to December 2020".

The tax transaction has some similarities to the old Refis programs because it offers large discounts on tax debt, but with the main and fundamental difference that its benefit is linked to the taxpayer's ability to pay, and those who are financially well-off are not entitled to participate. The decision to open this round also aims to inhibit Refis attempts that are currently underway in Congress.

The new round is outlined in Ordinance No. 1,696, published yesterday in the "Official Gazette." The PGFN (Attorney General's Office for the National Treasury) estimates that the program should renegotiate approximately R$ 1.2 billion in tax debts registered as outstanding debt. This amount is a "conservative" estimate, according to Attorney Everaldo Souza Passos Filho, coordinator of monitoring and general control of outstanding debt. It is based on the historical average of participation in this type of program.

This volume, he explained, represents about 10% of the debt stock that could be renegotiated. The expert stressed to Valor that the distinguishing characteristic of this new round of transactions is its focus on the pandemic. Passos estimates that the program should generate R$ 333 million for the government coffers by 2024, with R$ 40 million this year. He emphasizes that "those who can pay will not receive the benefit."

According to the decree, the transaction will begin in March and includes companies registered under the Simples Nacional tax regime, as well as those with outstanding Individual Income Tax (IRPF) debts related to the 2020 fiscal year. The program will remain open until June 30th.

This is the third measure taken by the government to confront the second wave of COVID-19. Last Friday, the payment of the last batch of PIS/Pasep salary bonuses was brought forward. The day before yesterday, a Provisional Measure was reissued that simplifies credit access, eliminating the requirement for a series of documents. Others are on the radar, and the most anticipated is the renewal of emergency aid, which is the target of strong pressure from Congress.

According to the PGFN (Brazilian Federal Attorney General's Office), the renegotiation will be based not only on an assessment of the taxpayer's ability to pay, but also on the economic and financial impacts that companies and individuals suffered during the pandemic last year.

“For this purpose, in the case of legal entities, the impact on the capacity to generate results is considered to be any percentage reduction in the sum of the monthly gross revenue for 2020 (starting in March and ending in the month immediately preceding the month of adhesion), in relation to the sum of the monthly gross revenue for the same period in 2019,” informs the PGFN. “For individuals, the impact on income commitment is considered to be any percentage reduction in the sum of the monthly gross income for 2020 (starting in March and ending in the month immediately preceding the month of adhesion), in relation to the sum of the monthly gross income for the same period in 2019.”

According to the statement, the tax transaction plan will allow for an initial payment equivalent to 4% of the total value of the selected registrations, which can be paid in installments of up to 12 months. The remaining balance can be divided into up to 72 months for legal entities, with the possibility of discounts of up to 100% on fines, interest, and charges, respecting the limit of up to 50% of the total debt.

In the case of individuals, the payment can be divided into up to 133 months, the same criteria valid for sole proprietors, micro-enterprises, small businesses, educational institutions, charitable hospitals, cooperatives and other civil society organizations, with the possibility of discounts of up to 100% on fines, interest and charges, respecting the limit of up to 70% of the total debt amount.

Tax lawyer Daniela Duque Estrada, partner at the law firm Castro Barros Advogados, highlights the provision for the use of the Legal Procedural Negotiation (NJP) mechanism in this program. “With the NJP, there is the possibility of settling the debt through agreements on guarantees and the potential sale of assets to pay the negotiated amounts, allowing all available means for the taxpayer to regularize their tax situation, thus fulfilling the principle of cooperation between the tax authorities and taxpayers,” states Daniela.

The Economic Policy Secretariat of the Ministry of Economy, which helped formulate the instrument, highlights that the transaction has already renegotiated R$ 81.9 billion in debts. According to the SPE, the economic recovery scenario removes any justification for issuing a comprehensive tax installment plan. "On the contrary, it reinforces the importance of the transaction focused on taxpayers still facing difficulties due to the pandemic."

Source: Valor Econômico